Guest Column by Dean Swanson

I got a call from one of my SCORE clients who asked a very good question about her small business dilemma. This CEO said, “Dean, I can see it happening again this year. My customer payments this time of year are giving me a headache, and I need some help to think through this problem and develop some strategies so that it doesn’t happen again.”

Americans love to spend money during the holiday season, and a lot of that money finds its way into the coffers of small businesses. The average small or midsized business earns a whopping 20 percent of its annual revenues in the weeks between Thanksgiving and Dec. 31, according to a new survey. Small and midsized businesses that sell products (as opposed to services) earn 28 percent of their annual revenues during that period.

But it’s not all good news, reports the second small business and money survey conducted by Survata for WePay. WePay, the provider of integrated payments for online platforms, released new data that shows a majority of U.S.-based small and medium-sized businesses end the calendar year with at least one significant payment challenge, which severely impacts their business.

Conducted in partnership with Survata, an independent research firm, WePay polled more than 500 U.S.-based small business owners and operators for its second national SMB & Money Survey.

More than 70 percent of the business owners surveyed say they faced at least one serious business problem during last year’s holiday season, the most common being late payments.

More than 21 percent of small and midsize businesses surveyed struggled with late payments between Thanksgiving and Dec. 31, 2016. What’s more, over two-thirds of those surveyed say at least 10 percent of their customers fail to pay on time.

When your business doesn’t get paid on time, it not only puts a major crimp in your cash flow, but it also eats up valuable time you could be spending on more important things. Nearly six in 10 business owners in the survey say they have to follow up at least twice to get late-paying customers to meet their obligations.

Even small business owners who get paid immediately at the point of purchase, such as retailers and e-commerce businesses, struggle with their own financial issues during year-end. In fact, 26 percent of respondents lost money to fraud or chargebacks (disputed charges) in the last 12 months; 22 percent of those lost $5,000 or more. Making matters worse, if you have too many chargebacks, you may run into problems with your payment processing company.

So what did I suggest to my SCORE client CEO? Again, I shared a SCORE business resource partner, Rieva Lesonsky, who is the CEO of GrowBiz Media, a content and consulting company specializing in covering small businesses and entrepreneurship and SmallBizDaily.com. In a recent post on this topic, she gave some great suggestions.

First, protect yourself. If you don’t want to be one of these statistics, it’s important to take steps to protect your business.

• Analyze the reasons behind your chargebacks. Chargebacks can be caused by credit card fraud, such as stolen cards, or by “friendly fraud,” in which customers order products online, then claim they never received them and ask for a refund. If your website doesn’t provide accurate, detailed product descriptions, you may also end up with a high number of chargebacks from dissatisfied customers when the products aren’t what they expected.

• Maintain proper website security, and follow the payment processing protocols recommended by your payment processing company.

• Make sure the descriptor (the business name that appears in customers’ credit card statements) is recognizable as your business. When customers don’t recognize a descriptor, they often assume they’ve been charged in error and dispute the charge.

• For sales transacted in person, always check the customer’s identification, and make sure that the signature on the credit card matches their signature.

If your problem is late payers, the best defense is being proactive. Follow these tips to get your customers to pay on time:

• Send invoices immediately upon delivery of products or services. Use electronic payment acceptance and online invoicing to speed things up.

• Make sure you send your invoices to the correct address, department and individual.

• Design invoices that are easy to read, and clearly state the amount due, due date and how to pay.

• Follow up with customers as soon as a payment is late. The faster you act, the more likely you are to get paid before the year is up.

• For customers who consistently pay late, you’ll have to consider whether it’s worth continuing to do business with them. If you decide to keep working with late payers, institute policies to protect your business such as requiring cash on delivery or partial payment upfront.

Dean Swanson is a volunteer certified SCORE mentor and former SCORE chapter chairman, district director and regional vice president for the northwest region.